CBO projects federal subsidies for health insurance coverage

The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation has released a report which updates the CBO’s baseline 2018 to 2028 projections of the number of noninstitutionalized people under age 65 with health insurance and the federal costs associated with subsidizing this coverage through various programs and tax provisions. It is anticipated that these projections will be as the benchmark for assessing proposed legislation’s effects on the federal subsidies (CBO Report, May 24, 2018).

Background

The CBO report provides projections for noninstitutionalized people under the age of 65 with health insurance and the federal costs associated with each kind of subsidy. Health insurance is subsidized by the federal government through a variety of programs and tax provisions. Medicaid and the Children’s Health Insurance Program accounts for 40 percent of federal spending on subsidized health insurance. Medicare accounts for 10 percent. Additional federal spending on health insurance is for coverage obtained through the marketplaces established by the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), as well as subsidies in the form of tax benefits for work-related insurance.

Cost projections

According to the CBO report, about 244 million noninstitutionalized Americans will have health insurance in an average month in 2018, while 29 million will not. By 2028, it projects that 243 million noninstitutionalized Americans will have health insurance while 35 million will be uninsured. In 2018, net federal subsidies for insured people will cost $685 billion, according to the CBO report. By 2028, federal spending will reach $1.2 trillion.

The following represents the 2018 cost projections for federal subsidies for noninstitutionalized people under the age of 65 in the below categories:

Work-related coverage: $272 billion

Medicaid and CHIP: $296 billion

Nongroup coverage and the Basic Health Program: $55 billion

Medicare: $82 billion

Taxes and Penalties: $21 billion

The projected expenditures over the 2019 to 2028 period under current law:

Work-related coverage: $3.7 trillion

Medicaid and CHIP: $4 trillion

Nongroup coverage and the Basic Health Program: $760 billion

Medicare: $1 trillion

Taxes and Penalties: $313 billion

Comparing previous projections

A comparison of the CBO’s latest 10-year projection to its comparable 2017 projections indicates the federal government will pay less money on subsidized health insurance and the number of uninsured people will increase. In September 2017, the CBO issued a detailed report comparable to this one. A comparison indicates that the projections have shifted. The CBO lowered its 2018 to 2027 net federal subsidies for health insurance by 5 percent.

Also, the projected number of people with subsidized coverage in 2027 under the ACA is projected to fall by 3 million. The elimination of the penalty associated with the individual mandate is expected to account for roughly half of the projected reduction in work-related coverage over the next decade. It is projected that 2 million fewer people will enroll in work-related coverage in most years after 2018. The CBO has modified its 2017 projections to estimate that 5 million more people will be uninsured in 2027.